A Mixed Bag
Job Growth Continues, But at a Slower Pace
The U.S. economy continued to grow in July, although at lower levels than the significant growth in May and June. The labor market added nearly 1.8 million workers, while the unemployment rate dropped to 10.2%. In normal times this would be considered a blockbuster report, but after the crushing loss of more than 20 million jobs in April, the economy still has a long way to go to dig out of its current hole. Even with this strong report, nearly 13 million people remain unemployed in America.
Top Takeaways from the Report
Job Growth Continues but Slows
Employment growth in July continued in the United States, adding 1.76 million jobs to the labor market. This was slightly higher than the consensus forecast that 1.68 million jobs would be added in July, but much slower than the growth of 4.79 million jobs in June. While it is encouraging to see the economy continuing to recover, we still have a long way to go.
The economy entered a recession in March and in two months, the labor market lost more than 22 million jobs. In the last three months, we have regained more than 9 million jobs. However, even with the recent gains, nearly 13 million people remain unemployed. As a result, unemployment remains higher than it was at the worst point of the Great Recession of 2009.
The unemployment rate also continues to improve, although it remains at very high levels. From June to July the unemployment rate dropped from 11.1% to 10.2%. Again, even though the drop in the unemployment rate is a good sign of a recovering economy, the current rate remains higher than at the highest point of the Great Recession.
An unsettling sign of the tenuous recovery is that the labor force participation rate dropped from 61.5% in June to 61.4% in July. In other words, even though more people became employed over the last month, many people also gave up and left the labor market entirely, causing the participation rate to drop. Normally, a growing job market would attract more people to come off the sidelines and reenter the labor force.
Growth by Industry
Employment in leisure and hospitality increased by 592,000 in July, accounting for about one-third of the gain in total nonfarm employment in the last month. Employment in food services and drinking places rose by 502,000, following gains of 2.9 million in May and June combined. Despite the gains over the last 3 months, employment in food services and drinking places is down by 2.6 million since February. Over the month, employment also rose in the amusement, gambling, and recreation sector (+100,000).
Government employment rose by a very strong 301,000 in July but is 1.1 million below its February level. Most of the gain can be attributed to educators returning to work with government education sectors adding 245,000 jobs. Temporary census employment also contributed to the strong growth, creating 27,000 jobs in the government sector.
Retail trade added 258,000 jobs. Employment in the industry is 913,000 lower than in February. In July, nearly half of the job gain in retail trade occurred in clothing and clothing accessories stores (+121,000). By contrast, the component of general merchandise stores that includes warehouse clubs and supercenters lost jobs (-64,000).
Health care added 126,000 jobs, with employment growth in offices of dentists (+45,000), hospitals (+27,000), offices of physicians (+26,000), and home health care services (+16,000). Job losses continued in nursing and residential care facilities (-28,000). Employment in health care remains down by 797,000 since February.
Employment in social assistance increased by 66,000, with child day care services accounting for most of the gain (+45,000). Employment in social assistance is 460,000 lower than in February.
Construction employment changed little (+20,000), following job gains of 619,000 in May and June combined. However, employment in the industry remains 444,000 below its February level.
Mining employment continued to lose jobs in July, losing 7,000 jobs in the last month.
The Bottom Line
A New Phase of Recovery
The July numbers could suggest that the U.S. is entering a second phase of the recovery. Many economists have suggested that after a powerful first phase, the economy would enter a slower, longer phase of the recovery as the economy struggles to return to normal. With job growth slowing, we could be entering what some call the “90% economy”.
All of this is framed by the current debate in Washington about the next economic stimulus bill. With a tenuous recovery and signs of a resurgence in the virus, it is imperative for Congress to come together on a stimulus package as quickly as possible. Without this, the recovery will stall, more businesses will fail, and unemployment will increase. This could then snowball into further economic turmoil, as people miss rent or mortgage payments and as poverty rates and demand for critical safety net support programs rise.
The division of Economics and Public Policy at Zions Bank informs and educates employees, clients, and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.
Content is offered for informational purposes only and should not be construed as tax, legal, financial or business advice. Please contact a professional about your specific needs and advice. Content may contain trademarks or trade names owned by parties who are not affiliated with Zions Bancorporation, N.A. Use of such marks does not imply any sponsorship by or affiliation with third parties, and Zions Bancorporation, N.A. does not claim any ownership of or make representations about products and services offered under or associated with such marks.